Ready For Resistance
Obama will face increasing partisan opposition to major elements of his plan, even as he attempts to change the tone of political debate in Washington. But he may run into resistance from some Democrats as well, given the size of his ambitions.
Even if willing, can Congress move as swiftly as Obama would like? Axelrod said the goal in the White House is action this year on health care and movement as well on the energy plan. “There are certainly things in here that will trigger a fight,” he said. “But as he said when he announced for president, change doesn’t happen without a struggle. The easiest thing in Washington is to take the path of least resistance, to tinker at the margins. I think American people recognize we can’t do that right now.”
Politico: Chamber of Commerce returns to opposing Obama.
Predictable Conservative Reaction
W. Post: “Republicans Attack Obama Budget, Call It Loaded With Spending”
The Plum Line on latest false attack against FY09 appropriations bill: “Conservatives are hammering the House’s new $410 billion spending bill because it contains $200,000 for what they’re derisively referring to as “tattoo removal.” … But a little reporting reveals that that this “tattoo removal” program is an anti-crime program in the San Fernando Valley that re-integrates reformed gang members and makes it easier for them to find jobs. Two Los Angeles law enforcement officials I just spoke to — one who identified himself as a ‘conservative Republican’ — swore by the program for reducing crime and saving lives.”
CBPP’s Greenstein debunks small biz claim: “The budget already is facing several lines of attack that rest on inaccurate or misleading charges. Chief among them is the claim that the tax increases for people who make over $250,000 will seriously injure small businesses. In fact, small businesses would win under this budget.”
Peterson’s Misleading Analysis
The pro-austerity Peterson Foundation criticized the budget, saying, “The President’s budget results in total debt-to- GDP of 96 percent and rising by 2010. This serves to demonstrate the need for the creation of a Fiscal Future Commission to help us get our federal finances in order before we lose the confidence of our foreign lenders.”
But NYT’s Paul Krugman says the debt-to- GDP ratio would not rise so uncontrollably, though does offer caution: “According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.”
Further, Krugman emphasizes the real culprit: “sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.”
More nitpicking from the austerity crowd: Obama’s too optimistic! AP: “some deficit hawks suggested that Obama was being too optimistic given the severity of the recession. ‘He is relying on a strong economic comeback very quickly. And he’s assuming that a lot of the new issues will be paid for,’ said Robert Bixby, the executive director of the Concord Coalition, a bipartisan fiscal watchdog group.
The proposal would make permanent several new and expanded tax credits enacted in the economic recovery package this month. Among them, the $400 tax credit for workers. Couples could get up to $800 a year. The budget would make permanent the expanded $2,500 tax credit for college expenses. An expansion of the $1,000 child tax credit to more low-income families also would be made permanent.
Tax cuts enacted under the Bush administration would expire in 2011. Couples making more than $250,000 would see the top tax rate return to 39.6%. Those families also would face new limits on the amount of deductions they could take, including deductions for charitable donations.
The budget would eliminate capital gains taxes on small businesses and make a research tax credit permanent. It would also expand a provision that allows money-losing companies to get refunds from taxes paid in previous years, when the companies were profitable.
The proposal targets oil and gas companies for several tax increases, including a new excise tax on companies that drill in the Gulf of Mexico.
“The administration says it wants to narrow the annual $300 billion gap between taxes owed and taxes collected,” according to AP.
…the key here, and what I think has the potential of making this move more palatable, is that the Obama plan does not raise the marginal rate on the affluent — or at least not beyond allowing rates to return to the level seen during the Clinton administration (just half of what they were at the outset of the Reagan administration, I might note).
Instead of raising the marginal rate on high wage earners — say from the 39 percent seen during to the Clinton administration to 45 percent or even 50 percent (remember, this is not the rate on all income, only the rate on dollars earned above a particular mark, say $250,000 or $1 million in a year) — the Obama plan would instead curtail itemized deductions to the benefit conferred following Ronald Reagan’s tax reform of 1986. That is to say, instead of accruing a $3,900 benefit on $10,000 of itemized deductions (assuming a 39 percent marginal rate), an individual would only accrue $2,800 in benefits — again, the same level of benefit derived under President Reagan’s 1986 legislation.
So while the tax bill for the very wealthy would go up under the Obama plan, the marginal rate — the clearest symbol to the aggregate of taxpayers of the overall tax burden — would not go up.
GOP Sen. Chuck Grassley spins the itemized deduction provisions as “sleight of hand.”
Eyes on Trade: “Obama Budget to Close Offshore Tax Loopholes”
His efforts would add to a budget deficit already swollen by Mr. Bush’s policies and the recession, creating the largest deficit, relative to the size of the economy, since World War II. Erasing that deficit will require some tough choices — about further spending cuts and tax increases — that Mr. Obama avoided this week.
But he nonetheless made choices.
He sought to eliminate some corporate subsidies, for health insurers, banks and agricultural companies, that economists have long criticized. He proposed putting a price on carbon, to slow global warming, and then refunding most of the revenue from that program through broad-based tax cuts. He called for roughly $100 billion a year in tax increases on the wealthy — mostly delayed until 2011, when the recession will presumably have ended — and $50 billion a year in net tax cuts for the nonwealthy.
The history of the United States economy over the last 70 years can be roughly divided into two periods: the decades immediately after World War II, when inequality plummeted, and the past three decades, when global economic forces and government policies caused it to soar. Mr. Obama is setting out to begin a third period that looks more like the first than the second.
MyDD’s Charles Lemos celebrates: “The Return of Fairness in America”
EPI: “An honest path to sustainability”
Budget: Health Care
President Barack Obama’s new budget includes more than $1 billion to help the U.S. Food and Drug Administration strengthen its food safety efforts, $6 billion for cancer research and a program to send nurses to the homes of new mothers to check their babies. [Also, the] adoption of healthcare information technology such as electronic medical records and a controversial plan to compare medical treatments head to head to find what works best…
…It projects that the changes would save $1.8 billion in 2010, $16.2 billion in 2011 and increasing amounts annually to create by 2019 a $633.8 billion fund to pay for healthcare reform…
…Congress has already provided $25 billion to help newly laid-off workers pay for health insurance coverage under a law known by the acronym COBRA.
Obama’s budget suggests that spending up front to get coverage for more of America’s 46 million uninsured people will save cash if patients get preventive care and avoid expensive and chronic diseases…
…The budget includes $1.1 billion for new reviews of competing drugs, treatments and head-to-head trials of drugs. The move is based on several recent studies that have shown cheaper and often generic drugs sometimes work better than new, patented and expensive medicines.
The budget also suggests that the Obama administration plans to negotiate with drug makers to lower drug prices, as the European Union and Canada now do.
Prospects for Health Care Reform
MoveOn.org launches petition in advance of next week’s WH health care summit: “Don’t let the insurance lobbyists delay health care any longer. In this economic crisis, we can’t afford NOT to pass quality, affordable health care for all this year.”
GoozNews outlines the debate ahead prompted by Obama’s $634B fund for health care reform:
The downpayment approach is a bow to political reality. If there is going to be comprehensive health care reform this year, it will have to be worked out on the floors of the House and Senate. The special interests — hospitals, physician guilds, drug and device companies, durable equipment makers, nursing home chains, dialysis clinics, and, of course, the insurance industry — are going to have their rhetorical endorsement of health care reform put to the test. Will they be willing to take reduced growth rates in the future so that everyone can have health insurance?
Individuals and small businesses will not be let off the hook. They will be asked to commit to buying health insurance, and accept the idea that not every new technology that comes down the pike is necessarily the best option for improving their health. The nation will need to debate affordability. Are we willing to have a subsidized public health insurance option (or an expanded Medicare) to cover people who cannot afford private insurance or don’t wish to be part of that marketplace.
Time updates on the semi-secret talks led by Sen. Kennedy: “…since the middle of last fall, Kennedy’s group has held biweekly meetings … Although they are about halfway through the agenda, participants say progress has already been made. The group agrees on broad principles like a focus on prevention, a commitment to cutting costs and universal coverage approached through the expansion of employer plans. But the group — so far on the friendliest of terms — has disagreed on whether coverage should be mandated or simply offered to all individuals, how much money is needed and what the proper role of government plans should be in the private system. And they haven’t even gotten to some of the tougher parts yet, like how to make cuts in Medicare and Medicaid.”
Brian Beutler looks at the President’s new principles for health care reform: “These principles call for universality, but not for a public option. That seems pretty backwards to me.” Ezra Klein: “The question now becomes whether Kennedy and Dodd’s people decide to fight for its inclusion.”
The Plum Line: “Major CEOs Warm To Obama On Health Care”
Mortgage Bill Delayed In House by Right-Leaning Dems
The fast-track housing bill, which had been expected to pass the House today, has been temporarily pulled to address concerns raised by moderate Democrats about bankruptcy reforms …
…In the Democrat’s Caucus-Whip meeting today, Rep. Ellen Tauscher (D-Calif.), a leader of the moderate New Democrat Coalition, spoke up about adding provisions to deal more broadly with loan modifications, instead of focusing more narrowly on bankruptcy.
“This was a real victory for the New Democrats,” said a senior House Democratic aide. “The concern was that they want every possibility exhausted before people are forced to go into bankruptcy… I not sure they’ll really ask for any changes in the bill, but they want to hear Donovan address those concerns. They wanted more time.”
More from Thrush: “Majority Leader Steny Hoyer (D-MD) now predicts the delayed housing-bankruptcy reform bill will be on the floor by next Tuesday.”
Congress Matters: “Check out the AP spin on the delay of the cramdown bill today. I’ve never seen anyone get things so backward. To hear them tell it, the New Dems and Blue Dogs are the Friends of The Little Man, while mustache-twisting schemers like John Conyers are plotting to do Big Banking’s business. Watch them take otherwise accurate quotes and put them in a context that gives the reader the impression that the positions entirely reversed here.”
D-Day: “The concern of ‘moderates’ is simply a lie. Homeowners who are struggling to make payments would benefit from having their lender be more inclined to give them a lower payment. After all, we practically own the banks at this point. The least they could do is act in the interest of the majority of Americans.”
Citigroup Deal: Nationalization or Suckers’ Bet?
Big Picture’s Barry Ritholtz rips deal: “What does this do for us? Well, the higher investment stake creates an enormous incentive for John Q. Public to continue to pour money into Citi, regardless of valuation. The inept banking giant then has access to infinite amount of capital, courtesy of you, the 1040 filers. Its just another example of why these insolvent banks should be nationalized, or for you squeemish free marketers, FDIC mandated, pre-packaged Chapter 11, government funded reorganization.”
Beat The Press’ Dean Baker: “The government is handing even more money to Citigroup and the NYT is doing its best to cover up. The NYT reports on the fact that the government’s preferred shares in Citigroup are being converted to common shares at a price of $5 per share, more than twice the market price. The article describes this move as, ‘giving taxpayers more risk, but more potential for profit if the company recovers.’ This is extremely misleading. At the point of the transaction, the government is effectively losing half of its money, which had already been invested at a return that was far below market rates.”
Baseline Scenario’s James Kwak on “convertible preferred stock”: “What’s wrong with this? Well, nothing, if your goal is to give banks money. What you’ve just done is stick the government with the downside risk – we could get paid back in worthless stock – while the bank shareholders get all the upside potential. You’ve done this by giving the bank, for free, an option that has value.”
CNN/Money.com speculates on AIG and what new government action may be taken.
Budget: Student Loans
…Obama’s budget called for moving most of the nation’s roughly $90 billion in student lending into the direct-loan program run by the U.S. Education Department. The proposal is subject to review by Congress and possible changes. If adopted, the White House said it would save taxpayers more than $4 billion a year and end “entitlements for financial institutions that lend to students.”
The president’s plan sets up a clash between congressional Democrats, who praised it, and private-sector student lenders, once a powerful Washington, D.C., lobbying force brought low in recent years by scandal and the financial crisis…
…the proposal brings to a head years of criticism that the FFELP is too expensive, enriches lenders and ties higher education funding too closely to Wall Street’s ups and downs. “We need a system that benefits students, rather than banks,” said Rich Williams, spokesman for U.S. PIRG, a public interest advocacy group.
American Prospect’s Tim Fernholz: “Making [this] change has been a progressive priority for years and the inclusion of this provision in the budget is one more indicator that this is a progressive administration … The politics of the debate that will no doubt ensue around the change will be fascinating. The student lending lobby shells out to members of congress to keep their subsidies (House Minority Leader John Boehner and Ranking Education Committee Member Howard “Buck” McKeon are two major recipients). But many of the same people who receive lender dollars are also self-styled budget hawks.”
Budget: Oil & Gas
POGO on oil and gas royalities: “There is more of the good rhetoric concerning oil and gas royalty management that we’ve heard from Secretary Salazar, and the Department of the Interior (DOI) budget also promises to ‘provide a better return to taxpayers from mineral management.’ In order to do this, there are plans of ‘closing loopholes, charging appropriate fees, and reforming how royalties are set.’ Unfortunately, there is no mention of improving oversight or the effectiveness of royalty collections through increasing the number of auditors to oversee leases, which would be the key reform necessary for DOI to enforce both current and new regulations to provide taxpayers a better return. Hopefully we’ll see that in the more detailed DOI budget.”
Christain Science Monitor on Defense Sec. Gates’ need to reform Pentagon: “It will soon fall to Secretary Gates to make some unpopular choices – and probably step on some important toes – as his desire to reform a bloated Defense Department steeped in tradition, inertia, and bureaucracy collides with vested interests … Gates must force greater fiscal discipline on the military – and probably redirect spending from some weapons programs toward other priorities.”
Ezra Klein: “I don’t have the exact budget language yet, but I’m looking forward to the proposed cuts in farm subsidies. On the other hand, farm state Democrats and Republicans alike are already dismissing the need for those cuts…”
Yglesias: “It’s remarkable how even a hard-bitten rightwinger like Senator Chamblisss can suddenly see the virtues of a safety net when the beneficiaries are well-to-do agricultural firms.”
TNR’s Rob Inglis: “…while the direct-payments program is by all means a wasteful giveaway, it’s hard to see how it’s massively distorting the markets for agricultural commodities. Getting rid of it isn’t going to transform U.S. agriculture. In fact, the really transformative idea in Obama’s Department of Agriculture budget proposal—redirecting the money that would otherwise go to agricultural subsidies to pay farmers for the ecosystem services they provide—gets only a passing mention. It will be interesting to see the Obama administration flesh out its ideas for ecosystem-services payments…”
WH Panel on Green Jobs Meets Today
AP: “Green jobs, where are they and how to get them, will be the focus when President Barack Obama’s task force on middle-class working families formally begins its work on Friday in Philadelphia. The panel, chaired by Vice President Joe Biden, will hear from experts on the potential to create and fill these jobs … Green jobs, broadly defined as related to improving the environment, pay up to 20 percent more than other jobs, are more likely to be union jobs and likelier held by men, less so by minorities and city dwellers, according to a draft copy of a staff report to be released at Friday’s meeting at the University of Pennsylvania. Green jobs also are largely domestic jobs that cannot be shipped overseas.”
Sacramento Bee looks at satisfied green-collar workers at new Shiloh II wind farm near Suisun City:
Perales, the newly hired windsmith, said the job opening came none too soon. He was laid off last fall for the second time in as many years with no other income to support his wife, their 11-year-old daughter and 23-month-old twins. “It did a number on me,” Perales said. “We had to borrow money – a lot, actually. It was scary.”
A tip from a friend landed him the $14-an-hour job at Enxco a week before Christmas. “This is the best job I ever had,” Perales said earlier this week as he strapped on a climbing harness to demonstrate his tower-scaling equipment.
Perales had experienced working at heights during his housing construction jobs, but nothing like this. “I never even heard of a windsmith,” he said.
“What we specified in the budget is a cap-and-trade target,” Orszag said. There are a number of paths to reach this target, and the budget team did not get into specifics when creating its projection. “Under any plausible path,” Orszag said, “there is sufficient funding to do the energy efficiency investments” and finance tax credits for low- and middle-income workers, as specified in the budget.
“We are expecting that cap-and-trade will raise at least $600 billion [over 10 years],” he continued, adding that any additional resources would be used to offset higher energy costs for households across the country.
European industries are emitting less than in previous years because of the severity of the economic downturn. That seems like good news for the climate. But demand by industry for permits to emit carbon dioxide has withered and the price of the permits has plummeted. Because emitting now costs so little, industries have fewer reasons to clean up their production processes or switch to renewable sources of energy…
..One way to ensure that the permits maintain value over the longer term would be to price them at a sufficiently high level when large volumes of them go on sale after 2013, said [Deustche Bank's Mark] Lewis. That kind of intervention in the marketplace might require a change in E.U. law – but Mr. Lewis said that “should not be a deterrent to taking the necessary action should circumstances warrant it.”
WSJ’s Keith Johnson deems nuclear power strategy up in the air following budget decision to effective scrap Yucca Mountain waste site.
Push For New Trade Strategy
Working Life’s Jonathan Tasini: “A large group of Members of Congress is now pushing [President Obama] to declare a new era in trade [with a] letter being sent to the president by a group of 54 House members … one of the strongest parts of this letter is what it does not say: it does not call for a new trade agenda that is based on stronger ‘side agreements’ and more ‘enforcement’ of labor and environmental provisions.”
The Daily Gloom
WSJ on horrible 4Q GDP : “The U.S. recession deepened a lot more in late 2008 than first reported, according to government data showing a big revision down because businesses cut supplies to adjust for shriveling demand. Gross domestic product decreased at a seasonally adjusted 6.2% annual rate October through December, the Commerce Department said Friday in a new, revised estimate of fourth-quarter GDP . The 6.2% decline meant the worst quarterly showing for GDP since a 6.4% decrease in first-quarter 1982 GDP .”
CNN/Money.com, “Problem Bank List Keeps Growing: “The government’s closely watched list of troubled banks grew during the fourth quarter to its highest level since 1994, regulators said Thursday. The Federal Deposit Insurance Corp. reported that the number of firms on its so-called ‘problem bank’ list grew to 252 during the last three months of 2008, compared with 171 banks making the list in the prior quarter.”
BBC: “US orders for long-lasting manufactured goods fell by more than expected in January as the global economic downturn continued to bite. New orders for durable goods fell 5.2%, official data showed, the sixth month in a row the figure has fallen.
W. Post: “Production cuts led to job cuts, driving up unemployment rolls. The number of first-time jobless claims rose to 667,000 last week, an increase of 36,000 from the previous week. The number of people on unemployment also climbed, partly because of an extension of benefits in several states. As of Feb. 14, 5.1 million people were collecting unemployment, an increase of 114,000 from the previous week.”
NYT talks to unemployed in states where conservative governors are denying them federal help. Says one in Texas, “It just seems unreasonable that when people probably need the help the most, that because of partisan activity, or partisan feelings, against the current new administration, that [Gov. Rick] Perry is willing to sacrifice the lives of so many Texans that have been out of work in the last year.”
CPAC Sets Sights On Killing EFCA
Politico’s Ben Smith: “Former Michigan Republican chairman Saul Anuzis signs on to Newt Gingrich’s arm of the campaign against the Employee Free Choice Act. He’ll be launching a new media campaign to ensure “your rights to a secret ballot and your rights to vote on a contract agreement,” … the anti-EFCA campaign is turning into something close to a full employment project for Republicans in exile.”
FireDogLake’s Tula Connell on new right-wing legislation: “Opponents of the Employee Free Choice Act in Congress made their Big Lie into a bill Wednesday, when Republican Sens. Jim DeMint (S.C.) and Mike Enzi (Wyo.) introduced the so-called Secret Ballot Protection Act. Before we go further, let’s clear up the bill’s false implication right now: The Employee Free Choice Act would not—repeat after me—would not, take away the secret ballot National Labor Relations Board (NLRB) election process if workers seeking to form a union wanted to use it.”
Terrance Heath contributed to the making of this Breakfast